What business people need to know about litigation

From the business person’s perspective, litigation can seem like a confusing, time-consuming and (unnecessarily) costly drain on the bottom line. Getting an insider’s view of litigation’s key elements not only puts the costs and value of litigation in context, but it also reveals how to use litigation as a tool to meet—and even reach—goals tied to that bottom line.

The lawsuit will cost money.

Litigation is not cheap. You’ll need lawyers who are skilled in handling litigation matters, and you’ll need to begin conducting discovery unless you can get the case dismissed very early on. During discovery, each side asks the other for information and documents including all sorts of electronically stored information (ESI). The cost of preserving, collecting, processing and reviewing documents and ESI can account for a significant portion of the legal bills. In addition, there’s also the cost of taking depositions, paying for flights across the country and possibly hiring experts to help prove your case.

With increasing frequency, law firms have developed budgeting tools and in-house e-discovery practices to drive client value. Still, some litigation expenses just remain a given. Whether you are being sued or bringing a lawsuit, it’s important to remember that the filing of the complaint or answer will inevitably trigger a series of costly obligations and deadlines that you will be legally required to meet. Thus, the early stages of the lawsuit are often the most critical when weighing the benefits of settlement.

It will take up your time and your team’s time.

Regardless of whether you are the plaintiff or the defendant, litigation will take time. Even if your company has an in-house legal department, there will be times that outside counsel will need to meet with the business people to:

Understand the facts of the case

Obtain accurate information for discovery responses

Determine where potentially responsive documents might be

Follow up for more information as the discovery process proceeds and the legal arguments evolve on both sides.

Unless the case is resolved, you and likely members of your team will have to sit for depositions. Deposition preparation will usually take a full day but can vary from a few hours to a couple of days in more complex matters. The deposition is likely to last an entire day as well. Read about what business people need to know about depositions here.

You may have to disclose confidential information.

Part of the discovery process requires disclosure of confidential, sometimes highly sensitive information, including business plans, pricing and other proprietary information. In response to these concerns, the parties will ask the court to enter a protective order, which restricts the use of such information. For instance, it can only be used for the purposes of the litigation and can only be shown to certain people. If the case is between competitors, the protective order will usually have a provision that allows only the other side’s outside attorneys to view it.

But more and more courts are construing confidential information very narrowly. If the information is a few years old, it might not be considered confidential in the court’s eyes. Even if it can be construed as confidential, if the case goes to trial, everything is usually open to the public, and it might be hard to maintain confidentiality at that point.

Even if you did everything right, you may not be able to win the case immediately—or at all.

Some of the lawsuits filed against your company have no real merit and will allege facts that are not accurate. While this is understandably frustrating, unfortunately, if there are factual disputes, it will be hard to win outright early on. A court will only grant a motion to dismiss if there are no facts under which the plaintiff could state a claim for relief. It is a high bar.

The next opportunity for getting a case dismissed outright is summary judgment. But if there are material factual disputes, the motion will be denied—and it is rare that there are not such disputes.

If summary judgment is not granted, the next opportunity to win outright is trial. But of course, with trial comes expense and a risk of losing. Instead, what litigation often entails is picking away at the other side’s case bit by bit to convince them to settle the case on favorable terms.

Trial can sometimes be a crapshoot.

No matter how strong your case is or how good your lawyers are there is always a risk that you could lose at trial. So much depends on the judge or the jury, and you just cannot control everything. Therefore, if you can get the other side to a resolution that you can live with, you should consider it long and hard before rolling the dice at trial. If you do decide to go to trial, you need to be prepared to live with the consequences if you lose.

In some instances, however, settlement might not make sense.

Despite the risks, sometimes a case should not be settled, and you should take it to trial. If you have a strong case and the other side simply refuses to agree to a reasonable resolution, there is no reason to cave. Likewise, even if you have a fair risk of losing, sometimes sending the signal to others in the market that you are not afraid to take a case to trial will save you money in the long run. While paying the nuisance value just to get rid of a case may make sense in some instances, be sure you’re not sending the message to the plaintiff’s bar that you are willing to pay $25,000 to $50,000 without any fight whatsoever or else you can count on being sued much more regularly. If there is a particularly strong case, it may make sense to try it so you can rattle it as a saber in other matters. So much of litigation is just one big game of chicken, and the other side needs to understand that you are not going to be the first one to blink every time.

Conclusion

Despite its drawbacks, litigation can be an effective method of obtaining or protecting certain business objectives. But the only way to properly decide whether litigation makes sense is to understand the costs and risks inherently involved in all litigation. Knowing the parts of litigation that can be controlled —and those that can’t—lets those involved recognize a dispute’s pressure points and empowers better decision-making all along the way.